If you’re planning to purchase real estate property, you’ve probably heard of an escrow account. It seems too complicated at first, but it’s best you learn as much about it before you encounter it. Here’s a brief guide:
A Primer on Escrow
An escrow is an account that’ll let you pay all of your property bills, such as taxes, homeowner’s insurance premiums, and mortgage, in one go. An agent will act as a mediator between buyers and sellers, overseeing and coordinating the closing activities. They have to follow the written instructions provided by the two parties and remain unbiased.
The length of the process varies. It depends on several things, such as the availability of documents and the mortgage pre-approval. It also differs from state to state, since they have their own laws about it, so it’s crucial to do your research on it.
How It Works
The escrow process can be hard to understand, but you should be prepared if you’re going through with it. Here’s a brief breakdown of what you have to do:
- Secure Financing
You need to be pre-approved for a mortgage, even before you can enter a purchase contract. Once you have your eyes on the home you want, give the lender the property address. They’ll provide you with a statement containing your loan amount, interest rate, and other associated costs.
- Open an Account
After you and the home seller sign a purchase agreement, your real estate agent will collect a deposit and place it in an escrow account provided by a trusted company. They’ll be the third party who’ll get the documents needed to finalize the transaction.
- Wait for the Bank’s Appraisal
The bank that’ll provide your mortgage will do their own appraisal to protect their interests. If it comes out lower than the offered price, you may have trouble getting the financing you need. You have to make up the difference or continue to negotiate with the seller to try and get a smaller number.
- Inspect the Property
It’s a good idea to inspect the property before finalizing everything. Make sure that there’s no new damage and that the seller has left all items stated in your agreement. You can still back out of the contract if you find a serious issue.
- Close the Escrow Account
The process varies depending on the state. Generally, your agent will give you a lot of paperwork to sign. Read them carefully to ensure that there aren’t any problems. After that, the escrow officer will prepare a deed that has your name on it. And, just like that, you get to take possession of the property.
An escrow account is an incredibly convenient way to pay for your home. Protect your interests by finding a trusted company. Do your research and find one that’ll fit your needs best.